I say that if you are able to do both of these exercises, then it should be done in preference to something like a leg press or a wall-sit. However, I hesitate to use the word “functional” to justify doing either of these exercises. What may be functional for one person may not be functional at all to another. The question that must be asked before prescribing either of these exercises are “who are you training?” and “what are you training for?” Someone who is a construction worker moving a wheelbarrow all day may find the deadlift more “functional” for their occupation than the squat; yet in terms of daily life, we all squat whenever we sit on a toilet, sit on a chair, get in our car seat, etc. Yet, for someone who is bound to a wheelchair, neither of these exercises are functional for them.
It seems there needs to be a clear up on the confusion of a squat and deadlift before going any further. It’s been stated by some that somehow a deadlift might be more dangerous to perform than a squat. We have to clarify as to which type of deadlift is being performed. If one is using the straight-leg deadlift (SLDL), then this exercise looks nothing like the squat, but looks more like a Good Morning (except the weight is not loaded on the body). However, unless someone says explicitly that it is the SLDL they are doing, the term “deadlift” usually refers to the conventional deadlift (which does look a lot like a squat in terms of movement mechanics).
In the case of a conventional deadlift, if one is going to be injured while doing this exercise, then they shouldn’t be squatting with weights either (because it suggests that the squat mechanics is off). One should focus on fixing up the squat mechanics first (i.e. squatting without a load). There’s no reason why someone who can squat reasonably well can’t deadlift with proper form (as they are exactly the same movement). The only real difference between the two exercise is that one has the weight loaded on the body prior to starting the exercise; the other has the weight starting on the ground.
In many cases, the conventional deadlift has the person descending to a point where their hips are above their knee (i.e. above parallel). You can’t descend any further down because the weight is in contact with the ground and dropping your hips further down won’t contribute to the lift itself (you just have to ascend the extra distance before the lift even begins). In the case of squatting, it’s highly encouraged that the person squat to the point where they are at or below parallel (for a full range of motion). In any case, the muscles are still under tension when they descend all the way down; whereas it’s not in the case of a deadlift. For this reason, one can usually pull more on a deadlift than they can squat.